8-KFinancial EventsRegulation FDExhibits & Filings

Baker Hughes Co 8-K Report, Auditor Change (Jul 3, 2017)

Filed July 3, 2017For Securities:BKR

Summary

This 8-K filing from Baker Hughes Co (BKR), dated July 3, 2017, formally announces the completion of the previously agreed-upon combination between General Electric Company's (GE) Oil & Gas business and Baker Hughes Incorporated. The newly formed entity, Baker Hughes, a GE company (BHGE), is now operational. This transaction involved GE contributing its Oil & Gas business and $7.4 billion in cash in exchange for approximately a 62.5% stake in BHGE LLC, signifying a significant strategic shift and consolidation within the oilfield services sector. Key to investors is the accounting treatment of this transaction as a "reverse acquisition," meaning GE O&G's historical financial statements will form the basis for BHGE's future reporting. Furthermore, the filing details a change in BHGE's independent registered public accounting firm. Deloitte & Touche LLP is being dismissed due to perceived independence concerns related to GE, and KPMG LLP has been formally engaged as the new auditor for BHGE. This change in auditors, effective after the Q2 2017 filing, is a crucial governance point for investors to note.

Key Highlights

  • 1Completion of the combination between Baker Hughes Incorporated and GE's Oil & Gas business, forming 'Baker Hughes, a GE company' (BHGE).
  • 2The transaction is treated as a "reverse acquisition" for accounting purposes, with GE O&G's historical financials becoming BHGE's basis.
  • 3GE contributed its Oil & Gas business and $7.4 billion in cash for approximately 62.5% ownership of BHGE LLC.
  • 4Baker Hughes, a GE company (BHGE) has officially commenced operations as of July 3, 2017.
  • 5Deloitte & Touche LLP is dismissed as BHGE's independent auditor due to auditor independence concerns related to GE.
  • 6KPMG LLP has been engaged as the new independent registered public accounting firm for BHGE, effective post-Q2 2017 filing.
  • 7A press release announcing the consummation of the transactions was issued on July 3, 2017 (Exhibit 99.1).

Frequently Asked Questions

This 8-K filing officially announces the completion of the combination between Baker Hughes Incorporated and General Electric's Oil & Gas business. It details the transaction structure, the formation of the new entity 'Baker Hughes, a GE company' (BHGE), and significant changes regarding the company's auditors.

The transaction is accounted for as a "reverse acquisition." This means that the historical financial statements of GE's Oil & Gas business will be presented as the historical financial statements of BHGE for periods after the closing date. Baker Hughes Incorporated's historical financials will not be the primary basis.

The company is changing its independent auditor from Deloitte & Touche LLP to KPMG LLP primarily due to auditor independence rules set by the SEC. Deloitte identified certain non-audit services, business relationships, and employment relationships with GE (and GE O&G) that could impair independence for future audits of BHGE, even though Deloitte stated it maintained objectivity for interim reviews. Consequently, the Audit Committee decided to dismiss Deloitte and engage KPMG.

General Electric contributed its Oil & Gas business, along with $7.4 billion in cash. In return, GE received approximately 62.5% of the membership interests in BHGE LLC and a corresponding share of the voting power through Class B common stock.